Histone deacetylases (HDACs) catalyze the removal of acetyl groups from modified lysine residues in both histones and other proteins, and this activity toward histones is believed to repress gene expression by condensing chromatin. To understand the function of HDAC3 in the liver, where liver-specific conditional knockout causes increased acetylation of HDAC3-binding sites, increased expression of lipogenic genes, and hepatosteatosis (fatty liver), Sun et al. expressed forms of HDAC3 containing various mutations in mice with liver-specific conditional knockout of HDAC3. Mutants that were verified as catalytically inactive in vitro or when expressed in cells included the single mutants Y298F (YF) and K25A (KA), the combined YF/KA mutant, and the double mutant H134A,H135A (HAHA). Surprisingly, each of these catalytically inactive mutants either partially (those with the YF mutation or HAHA) or mostly (KA alone) rescued the hepatosteatosis and altered gene expression profiles associated with the liver-specific HDAC3 knockout. The extent of rescue correlated with the abundance of the mutant protein. In contrast, a mutant (HEBI) that disrupted the interaction of HDAC3 with the corepressors NCOR and SMRT failed to rescue the hepatosteatosis and increased expression of lipogenic genes in the liver-specific HDAC3 knockout mice. The extent of histone acetylation in the HEBI and YF mutants, which failed to rescue and successfully rescued, were similar to that in the HDAC3-knockout mice, suggesting that the function of HDAC3 in the regulation of liver metabolism is not related to its histone acetylation activity but instead relies on the interaction with the corepressor. Liver-specific knockout of NCOR, but not SMRT, caused a similar phenotype as liver-specific HDAC3 knockout. Furthermore, only NCOR exhibited circadian changes in genome occupancy that were in phase with the genome occupancy of HDAC3. Thus, the ability of HDAC3 to regulate metabolic genes in the liver relies on its interaction with NCOR but not its deacetylase activity. Consistent with this model of HDAC3 activity, exposure of primary hepatocytes from control mice with various HDAC inhibitors did not produce similar change in mRNA abundance as that observed in the hepatocytes from the liver-specific HDAC3 mice. The authors suggest that the mechanism of action of HDAC inhibitors may need reevaluation.